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New York is a notoriously expensive city, but average rental costs do fluctuate over time. In the past year there has been a slight downward trend of rental prices in Brooklyn and Manhattan. Minor declines in the early spring made way to more noticeable dips in rent in the summer months as new developments drove up vacancy rates across the city.

Rental Market Shows Signs of Slowing

The median rent in Manhattan has dropped to $3350, from $3382 one year previously. Though the difference in median rent is a mere $32, the small drop was a promising sign of a potentially cooling rental market.

As of that report the median price of a studio in Manhattan decreased 2.6 percent to $2,500 in the past year; one-bedrooms dropped 1.3 percent to $3,350; and rent for a two-bedroom apartment declined by 5.2 percent to $4,500.

Brooklyn continues to be a cheaper option than Manhattan, with an overall median rent of $2,750, $600 less than Manhattan. Brooklyn rents dropped at a rate that mirrored Manhattan, with studios decreasing 1.4 percent over the year for a median cost of $2,296; one-bedrooms dropping 0.4 percent to $2,600; and the cost of a two-bedroom apartment decreasing 5.3 percent to $3,000.

This pattern of declining rental costs did not translate to Queens. Though the borough did see price drops for one and two bedroom apartments, the rent for studios and three bedroom apartments actually went up.

Summer Slump in Rent Prices

There were dramatic decreases in rent within West Harlem and Central Harlem down by 8.5 percent and 6.8 percent since last quarter, respectively.

The cheapest rents in Manhattan were to be found in Washington Heights, where the median price of a one bedroom came to $1765. On the other side of the spectrum, the most expensive rents in Manhattan were to be found in Tribeca, Chelsea, the West Village, and Battery Park. The median cost of one-bedroom apartments in these wealthy neighborhoods were all well over $3500 a month.

Similar dips occured in Brooklyn rents. Vinegar Hill and Windsor Terrace showed the greatest decrease in rental prices, dropping 8 percent and 6 percent, respectively. However, other neighborhoods showed increases in rental prices since last quarter, with both Red Hook and Canarsie showing increases of 11-12 percent.

The overall spread of neighborhood affordability remained fairly static, with DUMBO, Vinegar Hill and Williamsburg ranking as the most expensive areas of Brooklyn, with the median cost of a one-bedroom apartment clocking in above $3000. Those hoping to save money should focus their search on Sunset Park, Flatbush, and Kensington, which all had a median rent of less than $2000 for a one bedroom apartment.

New Developments, Increase in Vacancy

One of the biggest factors in the New York rental market is the increase in brand new housing developments. These new residential high rises are popping up all over downtown Brooklyn, DUMBO and Brooklyn Heights. The influx of new housing is increasing vacancy rates across the city and softening the market slightly.

However, many of the trends in the rental reports are short term illusions. Eager to fill their new luxury high-rises, property managers are offering concessions, such as a free month of rent, to lure in tenants. These concessions, which can come in the form of waived brokerage fees, a free month of rent, a discounted security deposit or free gym membership, are becoming standard across the board in these new developments as landlords struggle to compete with other luxury buildings.

Buildings that offer a free month's rent as a concession for new tenants often distribute this saved value across the entire lease, leading to a discounted net-rent. As renters swoop in to take advantage of these deals, the overall housing market shows average rental prices that are lower than what the housing market is valued at. These trends could dramatically reverse at the one year mark when these special first year leases expire and rental prices shoot up to their valued rates. There is also the possibility that the rental bubble will burst, and all of the tenants drawn to these luxury buildings will vacate as soon as the concessions are lifted, throwing the NYC housing market into turmoil.

New York, USA - People walk near 8 Spruce Street skyscraper (Beekman Tower). The building at 265 m is the 12th tallest residential tower in world. It was designed by Frank Gehry.

Though the vacancies in these massive apartment buildings are softening the housing market for now, in the long term, the luxury amenities will probably actually drive the market upwards in these neighborhoods. Experts warn potential tenants tempted by discounted net-rent prices that they shouldn't expect to get the same deal next year.

However, this turmoil may still be a ways away. With even more luxury housing developments set to go on the market in the next year, property managers may be tempted to work with their current tenants to keep concessions in place in order to stay competitive with the fresh buildings entering the market.

All in all, the second most expensive city in America has shown signs of a slightly cooling housing market. Minimal decreases in rent in the springtime made way to more apparent dips in rental prices this summer. Whether these trends continue, or if the concession heavy high rise apartment inventory ends up blowing up the rental market, remains to be seen.

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